UK Tribunal Denies Luxury-Goods Input Tax Where Evidence Does Not Show VAT Charged

Summary 

• Unatrade bought luxury goods from UK retailers for export to Hong Kong and claimed input VAT. HMRC found that receipts and supporting records did not establish VAT amounts charged to Unatrade. The First-tier Tribunal agreed that the business had substantially failed to evidence the input tax claimed for the reviewed. 

• The Tribunal confirmed that HMRC’s discretion under Regulation 29(2) does not permit deduction without evidence of VAT charged. Its purpose is to accept alternative evidence capable of correcting defective invoices. Assuming retailers accounted for VAT was insufficient, particularly where documents omitted VAT amounts or identified purchasers other than the claimant. 

• The decision highlights practical risks for businesses buying high-value goods through retail channels. Before paying, purchasers should require valid VAT invoices in the legal entity’s name, reconcile VAT amounts to payment and export records, and escalate missing documents promptly. Alternative evidence must establish the VAT charge, not merely prove that. 

Extended article 

The First-tier Tribunal has dismissed Unatrade Ltd’s appeal concerning input VAT claimed on purchases of luxury goods, mainly watches, subsequently exported to customers in Hong Kong. Unatrade treated the exports as zero-rated and submitted monthly repayment returns. During a review of the July 2023 return, HMRC requested supporting documents and later assessed periods from July to November 2023. Unatrade supplied till receipts, bank statements and sales and export records. Although the documents covered most of the input tax claimed by value, HMRC considered they did not meet the VAT invoice requirements. Many showed no purchaser details, named somebody other than 

Unatrade, omitted the VAT rate or failed to state any VAT amount. The Tribunal found that Unatrade had substantially failed to prove VAT was charged to it. For July 2023, no additional information established the VAT amounts claimed. The Tribunal inferred that, had suitable evidence existed, Unatrade could have produced it during the proceedings. Unatrade argued that retailers would not provide valid invoices. The Tribunal noted that inability to compel a supplier was not persuasive where invoices had not even been requested. It also accepted HMRC’s extrapolation to later periods because Unatrade confirmed that its business model remained broadly unchanged. 

Regulation 29(2) allows HMRC to accept evidence other than a VAT invoice. However, relying on Tower Bridge GP, the Tribunal emphasised that the discretion allows defective invoice evidence to be corrected; it does not permit deduction without evidence of VAT charged. HMRC’s decision to deny most input tax was therefore not unreasonable. The operational lesson is direct. Export evidence and proof of payment do not replace evidence supporting input tax. High-value resellers should require invoices addressed to the purchasing entity, showing VAT explicitly, before settling purchases. Supplier onboarding, employee purchasing controls and invoice escalation should prevent personal retail receipts from. 

Official and external sources: UK legislation: VAT Regulations 1995 | HMRC VAT Notice 700: input tax evidence 

---

---